Falling tanker rates are making African crude more competitive in China. Unipec, the trading arm of Sinopec, bought two cargoes of crude from the Republic of the Congo, while an independent refiner in Shandong purchased one million barrels of Angolan oil.
Lower Freight Rates Cut Delivered Costs
Higher tanker rates in October had made it more expensive to ship Atlantic Basin crude to Asia. Voyages from Africa’s Atlantic coast tie up vessels for longer than routes from suppliers closer to Asian markets. When charter rates rise, even crude priced competitively at the loading port can lose its advantage once freight is included, prompting refiners to look elsewhere.
Greater vessel availability has since eased pressure on the freight market. Rates for several classes of oil tanker have fallen by around 50% from their October peaks. Depending on delivery terms, the cost of shipping and buying some African and Brazilian grades delivered to China has fallen by $5 to $10 per barrel compared with the previous month.
Congolese and Angolan Cargoes Find Buyers
Unipec bought two cargoes of Djeno crude, produced in the Republic of the Congo, at a discount of about $22 per barrel to Dated Brent. The deal was priced on a free-on-board basis at the loading port. Ocean freight still has to be added to calculate the delivered cost in China.
A Shandong refiner also bought one million barrels of Angolan Plutonio crude for delivery between late December and early January. The deal was reportedly priced at about $15 per barrel above ICE Brent, after premiums on some Angolan grades had recently exceeded $20. The Congolese and Angolan deals involve different crude grades, delivery terms and pricing benchmarks.
Lower freight rates widen the pool of potential buyers for African producers. Chinese refiners can also take advantage of the same decline to buy Brazilian crude, keeping competition for orders strong. Prices for cargoes delivered in December and January will show whether renewed Chinese demand is translating into better terms for African sellers.
